The Minimum Wage and Obamacare: A Common Denominator

Liberals are again campaigning to raise the minimum wage. The know-nothingism behind their position is appalling; not too many years ago, both the New York Times and the Washington Post editorialized that the minimum wage should be repealed. That was in the 1980s, before partisanship overcame everything else.

Here’s the thing about the minimum wage: it doesn’t do much damage, as long as you set it safely below the amount that employers are actually offering to entry-level, unskilled workers. Then legislators can pat themselves on the back without having done any serious damage. But if you set the minimum wage above the then-prevailing level for inexperienced and unskilled workers, the results will be dire.

The logic behind the minimum wage has always been murky. As Scott wrote quite a few years ago, “If you seriously think you can legislate wealth, why are you so cheap? Why don’t you set the minimum wage at $100 an hour?” Good question! Or how about $1,000 an hour? Then we could all retire at 40. What pikers these Democrats are!

The Democrats imagine that if they simply make it illegal to work for, say, $10 an hour, then presto! Everyone will have a job that pays more than $10 an hour. What could be simpler?

Note how the same reasoning applies to Obamacare. Millions of Americans have health care plans that the Obama administration considers “substandard.” In general, these are plans that protect against catastrophic illness. Most of what passes for “health insurance” isn’t insurance at all, it is simply a bargained-for shifting of bill-paying responsibility, exactly as if you “insured” your car against buying gasoline or changing the oil. Shifting responsibility for routine bills is expensive, because the insurance company will charge you the full amount of the anticipated costs, plus their own administrative mark-up. Catastrophic coverage is the most cost-effective form of health insurance, which is why millions of people choose it. But the Obama administration thinks it would be great if everyone had coverage that applies to everything–pregnancy, even if you’re a man; pediatric dental care, even if you don’t have any children; routine office visits for everyone.

So what do they do? Just as with the minimum wage, they apply the bluntest possible instrument: they make it illegal to buy a cost-effective, catastrophic loss insurance policy. What do they think will happen? Since cheap insurance is now illegal, overnight everyone will have “insurance” that covers everything under the Sun, including–especially including!–free contraception.

In neither case do Democrats take reality into account. There are many people whose skills and experience allow them to create only a modest amount of value. If a person can create $10 in value per hour, and the government makes it illegal to work for less than $11, the government has condemned that person to unemployment, with consequences that are likely to last a lifetime. Similarly, if a particular consumer optimizes his well-being with a health insurance policy that costs $5,000, and the government makes it illegal to buy any policy that costs less than $10,000, that person’s well-being has been seriously diminished.

Of course, the Democrats will tell us not to worry: if the consumer can’t afford the $10,000 policy required by Obamacare, he will get a government subsidy to help pay for it. But the reality is that only a small percentage of the consumers forced by Obamacare to buy more expensive products will qualify for a subsidy. And, in any event, that hardly solves the problem: a subsidy simply transfers the law’s adverse impact to another person who now has to subsidize someone else, in addition to paying more for his own family’s health care, thereby adding injustice to inefficiency.

That is the common thread between the minimum wage and Obamacare: the liberal belief that making the cheaper alternative illegal will painlessly force the more expensive (and therefore presumably better) alternative to become universal.